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Climate Change and Management Accountants

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Climate Change and Management Accountants

by Irene Teng, CIMA, 29 April 2011
topics:
Management Risk Management
tags:
CIMA climate change management accountants strategy sustainability

Climate change poses a major risk to the global economy – possibly shrinking its output by 20%, according to the 2006 Stern Review on the Economics of Climate Change prepared for the British government. Given the likely effects on habitat, resource availability and consumption, every organisation will be affected.

 
Tackling climate change is not just a question of ‘doing the right thing’. Businesses have a duty to their customers, employees and crucially, their shareholders, to deliver long-term value and to manage risk. In other words, sustainability has always been a fundamental strategic goal.
 
David Smith, CEO of Jaguar Land Rover, says: ‘Sustainability is now a core consideration from the board to the shop floor. Our finance business partners play a pivotal role not only integrating sustainability issues into our long-term decision making process, but in the equally critical part they play in ensuring the organisation recognises in a timely way, the risks and opportunities presented by climate change in the day to day course of running the business.’
 
Managing and mitigating climate change must be embedded in every company’s decision making. When it comes to capital expenditure and investment decisions, for example, it is vital that enterprises apply the principles of sustainable procurement and consider long-term implications – financial, environmental and social – rather than just short-term costs.
 
Ad Hoc Basis
Management accountants have a key role to play in driving sustainable strategic and operational decisions. But CIMA’s research shows that even where finance teams are engaged in climate change related activities, it has often been on an ad hoc basis.
 
This must change. Management accountants are equipped with tools and techniques that can ensure businesses understand the scale of the problem, come up with viable solutions and ensure they are properly implemented. They have a pivotal role in providing business intelligence to support strategy and influence decision making.
 
Without the rigour and commercial acumen of the finance function, it may prove impossible to truly embed sustainability into normal business life. Failure for management accountants to get involved now, when key decisions are being taken in areas like carbon trading and compliance with new climate change related regulations, could result in far higher costs, lost opportunities or reduced competitiveness.
 

CIMA and The Prince’s Accounting for Sustainability Project (A4S), an initiative of Britain’s Prince Charles, have conducted an international survey of almost 900 finance and sustainability professionals. CIMA also carried out in-depth interviews with experts in leading companies. This has helped us understand best practice in this area as well as identify opportunities for the management accountant to become more involved.

 
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